The tragedy of this story is that it's likely the business owner - the one who had to write a check for $85,000 (plus attorney's fees) didn't know one of his managers was acting so irresponsibly.
Yet the business owner is responsible for all of his/her manager's actions.
Get your managers trained, get a grievance procedure in writing.
Oh, and make sure not to promote people who don't have the faintest idea on how to manage people.
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